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Minnesota exports rise 6.5% in Q3, DEED reports

William Morris//November 29, 2018//

Although Minnesota’s exports grew 6.5 percent in the past 12 months, some sectors, such as soybean farming, have struggled in the face of new international tariffs. (AP file photo)

Although Minnesota’s exports grew 6.5 percent in the past 12 months, some sectors, such as soybean farming, have struggled in the face of new international tariffs. (AP file photo)

Minnesota exports rise 6.5% in Q3, DEED reports

William Morris//November 29, 2018//

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Tit-for-tat tariffs and global uncertainty haven’t yet derailed Minnesota’s growing export sales.

Companies in the state sold $5.7 billion in agricultural, mining and manufactured exports in the third quarter, the Minnesota Department of Employment and Economic Development reported Thursday. That’s up 6.5 percent from the third quarter of 2017. Minnesota’s gains ranked 19th among states for the quarter, but were not as strong as the country as a whole, which saw 8.1 percent year-over-year-growth.

“Many of the state’s core industries continue to experience strong export growth,” DEED Commissioner Shawntera Hardy said in a statement. “Minnesota businesses are also succeeding at making inroads into newer emerging markets.”

As in past quarters, Canada is the biggest buyer of Minnesota products, with sales valued at $1.2 billion, but Asia and Europe are catching up. Exports to Asia grew 13 percent, including 9 percent growth in China and 28 percent growth in South Korea. Exports to Europe grew 9 percent as well.

Optics and medical goods remain the state’s top export category at $1.1 billion, up 10 percent for the year. Other top exports included machinery ($896 million) and electrical equipment ($769 million), with sales abroad growing 9 and 10 percent respectively.

It’s not a surprise to see continued export growth, said Catherine Petersen, principal at St. Paul trade consultancy C J Petersen & Associates, because U.S. products and Minnesota products in particular continue to have strong reputations abroad. But she said the positive numbers don’t reflect the full impact of ongoing trade disruptions sparked by U.S. tariffs and retaliatory measures taken by other countries.

“The folks that I’m working with are not predicting a decline,” Petersen said in an interview. “… I think the big change is not necessarily in how things are working on the export side, but how companies are adjusting their import supply chain.”

Because the U.S. is now levying tariffs on raw steel and aluminum imports, companies that once imported metal for production in the U.S. are now considering moving some production steps overseas and importing finished components to avoid those tariffs, she said.

“The end result is some of that finishing work is being pushed to other countries where before it would have been done in the United States,” she said. “It’s what I would call an unintended consequence.”

Petersen, who specializes in trade compliance, said the best advice she can give to companies looking to buy or sell overseas is to make sure their products are classified accurately according to international tariff schedules so they know for certain what goods will or won’t be subject to additional duties.

The tariffs are affecting specific market sectors particularly hard. A report from DEED estimates that $603 million in annual Minnesota exports are subject to countermeasures in Canada, Mexico, China and the European Union. That includes trade in soybeans, pork products, motorcycles, watercraft and other categories worth tens of millions each year.

Bruce Abbe, president and CEO at the Midwest Shippers Association in Bloomington, said the soybean market has been particularly hard-hit. Entire logistics networks built to move products from western Minnesota to China have been idled, he said in an interview.

“The trade situation is really bad for ag up here on the commodity side of the business,” Abbe said. “Tariffs have really hurt the demand, and when you combine that with the strong production, it’s really a mess.”

Abbe’s group specializes in food-grade and other specialty grain types generally shipped on a smaller scale than bulk commodities. He said members have found opportunities to expand markets in Japan and other countries, in part because Canada is shifting attention to fill the new market opening in China. But in the long run, the loss of the China market will be keenly felt in the U.S., especially as other countries such as Brazil expand production and export capacity to remain competitive in years to come.

“China was so big in its demand for soybeans,” he said. “It was insatiable, and now that that’s gone, it’s a major, major shock that’s going to take some time to recover from.”

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